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Shares of coffee giant Starbucks (SBUX) have rallied about 20% from a closing low in early April. Now the stock is facing perhaps its biggest hurdle on the road to recovery: the 200-day moving average. Based on our review of the daily and weekly charts, we see a likely pullback scenario before the uptrend phase propels SBUX to even greater heights. Starbucks peaked in early March, making a new swing high even after the S & P 500 and Nasdaq 100 had already pulled back from their own peaks. Over the subsequent weeks, SBUX cratered from a peak around $117 down to roughly $77 in early April. While the S & P 500 set its intraday low on April 7, Starbucks scored a new swing low in late April before experiencing its own uptrend phase. Given the severity of the downtrend into the April low, the chart provided a fairly straightforward method of identifying an initial upside target. A 38.2% retracement of the Q1 drop comes in around $92, and a relatively flat 200-day moving average currently sits just above $95. With the strength in SBUX shares over the last week, this initial upside target off the lows has now been achieved. What gives us confidence that Starbucks will continue higher after a likely pullback from resistance? First, let’s consider the volume picture. The On-Balance Volume indicator, based on a simple methodology of aggregating daily volume readings, has just broken out to the upside after a six-week consolidation. This suggests that the volume on up days is enough to confirm a bullish phase for SBUX. The Chaikin Money Flow indicator, which uses a more sophisticated method for analyzing volume readings over the time, has been showing an “accumulation” reading since late April. As long as this indicator remains above the zero line, the volume is seen as supportive of the current uptrend phase for the stock price. Now let’s bring in more data to see how this recent upswing fits into the larger technical picture. The weekly chart of Starbucks really accentuates the cyclical pattern to the price action over the last seven years, with major peaks and valleys usually occurring every 12 to 18 months. In the last week, the Percentage Price Oscillator indicator has registered its fourth bullish signal since the 2020 Covid low. In each of the last three instances, SBUX has demonstrated a strong uptrend phase after these classic trend-following signals. Any time a chart hits a major resistance area, we must expect at least some short-term pullback for the market to digest recent gains. Based on our review of the short-term and long-term charts for Starbucks, we feel that a pullback could just be a pause within a much larger uptrend phase. DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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